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Debt. | 12 Months Ended
--- | ---
Dec. 31, 2020
Debt Disclosure [Abstract] |
DEBT. |
8. | DEBT.
Long-term borrowings are summarized as follows (in thousands):
|  | December 31, |
|  | 2020 |  |  | 2019 |
Kinergy line of credit |  | $ | 32,512 |  |  | $ | 78,338 |
Pekin term loan |  |  | — |  |  |  | 39,500 |
Pekin revolving loan |  |  | 20,580 |  |  |  | 32,000 |
ICP term loan |  |  | — |  |  |  | 12,000 |
ICP revolving loan |  |  | 9,384 |  |  |  | 18,000 |
CARES Act loans |  |  | 9,860 |  |  |  | — |
Parent notes payable |  |  | 25,533 |  |  |  | 65,649 |
|  |  | 97,869 |  |  |  | 245,487 |
Less unamortized debt premium |  |  | 230 |  |  |  | 461 |
Less unamortized debt financing costs |  |  | (759 | ) |  |  | (2,153 | )
Less short-term portion |  |  | (25,533 | ) |  |  | (63,000 | )
Long-term debt |  | $ | 71,807 |  |  | $ | 180,795 |
Kinergy Line of Credit – Kinergy has an operating line of credit for an aggregate amount of up to $100,000,000. The line of credit matures on August 2, 2022. The credit facility is based on Kinergy’s eligible accounts receivable and inventory levels, subject to certain concentration reserves. The credit facility is subject to certain other sublimits, including inventory loan limits. Interest accrues under the line of credit at a rate equal to (i) the three-month London Interbank Offered Rate (“LIBOR”), plus (ii) a specified applicable margin ranging between 1.50% and 2.00%. The applicable margin was 2.00%, for a total rate of 2.24% at December 31, 2020. The credit facility’s monthly unused line fee is an annual rate equal to 0.25% to 0.375% depending on the average daily principal balance during the immediately preceding month. Payments that may be made by Kinergy to the Company as reimbursement for management and other services provided by the Company to Kinergy are limited under the terms of the credit facility to $1,500,000 per fiscal quarter. The credit facility also includes the accounts receivable of Alto Nutrients as additional collateral. Payments that may be made by Alto Nutrients to the Company as reimbursement for management and other services provided by the Company to Alto Nutrients are limited under the terms of the credit facility to $500,000 per fiscal quarter. If the monthly excess borrowing availability of Kinergy and Alto Nutrients falls below certain thresholds, they are collectively required to maintain a fixed-charge coverage ratio (calculated as a twelve-month rolling earnings before interest, taxes, depreciation and amortization divided by the sum of interest expense, capital expenditures, principal payments of indebtedness, indebtedness from capital leases and taxes paid during such twelve-month rolling period) of at least 2.0 and are prohibited from incurring certain additional indebtedness (other than specific intercompany indebtedness). The obligations of Kinergy and Alto Nutrients under the credit facility are secured by a first-priority security interest in all of their assets in favor of the lender. Alto Ingredients has guaranteed all of Kinergy’s obligations under the line of credit. As of December 31, 2020, Kinergy had $16.0 million in unused borrowing availability under the credit facility. Pekin Credit Facilities – On December 15, 2016, Alto Pekin entered into a Credit Agreement (“Pekin Credit Agreement”) with 1st Farm Credit Services, PCA and CoBank, ACB, (“CoBank”). Under the terms of the Pekin Credit Agreement, Alto Pekin borrowed from 1st Farm Credit Services $64.0 million under a term loan facility that matures on August 20, 2021 (the “Pekin Term Loan”) and up to $32.0 million under a revolving term loan facility that matures on February 1, 2022 (the “Pekin Revolving Loan”), and together with the Pekin Term Loan (the “Pekin Credit Facility”). The Pekin Credit Facility is secured by a first-priority security interest in all of Alto Pekin’s assets. The Pekin Credit Facility and related agreements contain a variety of representations, warranties, covenants and events of default. Following a series of amendments and waivers among Alto Pekin, its lenders and their agent, certain terms of the agreements are as follows:
| ● | Interest accrues under the Pekin Credit Facility at an annual rate equal to the 30-day LIBOR plus 5.00%.
| ● | Alto Pekin is required to pay a monthly fee on any unused portion of the Pekin Revolving Loan at a rate of 0.75% per annum.
| ● | Alto Pekin and ICP are collectively required to maintain working capital of not less than 50% of the combined outstanding revolving lines of credit, which was $30.0 million at December 31, 2020; and an annual debt service coverage ratio of not less than 1.25 to 1.00, in addition to various other affirmative and negative covenants.
Alto Pekin and ICP collectively agreed to pay Alto Pekin’s and ICP’s lenders an aggregate of $40.0 million on or before September 30, 2020 (the “September Paydown Amount”) to reduce the outstanding balances of Alto Pekin’s and ICP’s respective term loans, to be allocated between them. Alto Pekin, ICP and their lenders contemplated funding the September Paydown Amount through asset sales, proceeds of any award, judgment or settlement of litigation, or, at our election, from funds contributed by Alto Ingredients to Alto Pekin or ICP. In March 2020, the Company granted to Alto Pekin’s lender a security interest in all of its equity interests in Alto Op Co. The Company and certain subsidiaries also entered into intercreditor agreements with the Alto Pekin’s and ICP’s lenders, and the agent for the Company’s senior secured noteholders, to address issues of priority and the allocation of proceeds from asset sales. On December 18, 2020, Alto Pekin and its lender further amended the Pekin Credit Facility to waive certain covenant defaults, including the covenant requiring Alto Pekin and ICP to pay the September Paydown Amount from an approved source of funds on or before September 30, 2020. The effect of this amendment was, in part, to deem the September Paydown Amount to have been timely paid. The parties also agreed to amend the Pekin Credit Facility to provide for a payment to Alto Pekin’s and ICP’s lenders of an aggregate of $24.9 million (the “December Paydown Amount”), on or prior to December 21, 2020, with $19.9 million allocated to Alto Pekin’s lenders and $5.0 million allocated to ICP’s lenders. On December 18, 2020, Alto Pekin and ICP paid the December Paydown Amount in full. Following receipt of the December Paydown Amount, any additional proceeds arising from the sale of any of the Company’s midwestern production facility assets will be allocated 33/34/33% among Alto Pekin’s and ICP’s lenders, collectively, the Company’s senior secured noteholders, and the Company, respectively; and any additional proceeds arising from the sale of any of the Company’s western production facility assets will be allocated first to the senior secured noteholders up to $20.0 million and then allocated 33/34/33% among Alto Pekin’s and ICP’s lenders, collectively, the Company’s senior secured noteholders, and the Company, respectively. As of the filing of this report, the Company believes it is in compliance with the terms and conditions of the Pekin Credit Facility. ICP Credit Facilities — On September 15, 2017, ICP, Compeer Financial, PCA, or Compeer, and CoBank as agent, entered into a Credit Agreement (the “ICP Credit Agreement”). Under the terms of the ICP Credit Agreement, ICP borrowed from Compeer $24.0 million under a term loan facility that matures on September 20, 2021 (the “ICP Term Loan”), and up to $18.0 million under a revolving term loan facility that matures on September 1, 2022 (the “ICP Revolving Loan”), and together with the ICP Term Loan (the “ICP Credit Facility”). The ICP Credit Facility is secured by a first-priority security interest in all of ICP’s assets. The ICP Credit Facility and related agreements contain a variety of representations, warranties, covenants and events of default. Following a series of amendments and waivers among ICP, its lenders and their agent, certain terms of the agreements are as follows:
| ● | Interest accrues under the ICP Credit Facility at an annual rate equal to the 30-day LIBOR plus 3.75%.
| ● | ICP is required to pay an annual nonrefundable commitment fee, calculated as 0.75% multiplied by the average daily positive difference between (i) the ICP Revolving Loan commitment (which may be reduced by ICP from time to time in increments of $0.5 million), minus (ii) the aggregate principal amounts outstanding under the ICP Revolving Loan.
| ● | ICP and Alto Pekin are collectively required to maintain working capital of not less than 50% of the combined outstanding revolving lines of credit, which was $30.0 million at December 31, 2020; and an annual debt service coverage ratio of not less than 1.50 to 1.00, in addition to various other affirmative and negative covenants.
ICP and Alto Pekin collectively agreed to pay ICP’s and Alto Pekin’s lenders an aggregate of $40.0 million on or before September 30, 2020, the same amount referred to above as the September Paydown Amount, to reduce the outstanding balances of ICP’s and Alto Pekin’s respective term loans, to be allocated between them. ICP, Alto Pekin, and their lenders contemplated funding the September Paydown Amount through asset sales, proceeds of any award, judgment or settlement of litigation, or, at our election, from funds contributed by the Company to ICP or Alto Pekin. In March 2020, the Company granted to Alto Pekin’s lender a security interest in all of its equity interests in Alto Op Co. The Company and certain subsidiaries also entered into intercreditor agreements with the ICP’s and Alto Pekin’s lenders, and the agent for the Company’s senior secured noteholders, to address issues of priority and the allocation of proceeds from asset sales. On December 18, 2020, ICP and its lender further amended the ICP Credit Facility to waive certain covenant defaults, including the covenant requiring ICP and Alto Pekin to pay the September Paydown Amount from an approved source of funds on or before September 30, 2020. The effect of this amendment was, in part, to deem the September Paydown Amount to have been timely paid. The parties also agreed to amend the ICP Credit Facility to provide for a payment to ICP’s and Alto Pekin’s lenders of an aggregate of $24.9 million, the same amount referred to above as the December Paydown Amount, on or prior to December 21, 2020, with $5.0 million allocated to ICP’s lenders and $19.9 million allocated to Alto Pekin’s lenders. On December 18, 2020, ICP and Alto Pekin paid the December Paydown Amount in full. Following receipt of the December Paydown Amount, any additional proceeds arising from the sale of any of the Company’s midwestern production facility assets will be allocated 33/34/33% among Alto Pekin’s and ICP’s lenders, collectively, the Company’s senior secured noteholders, and the Company, respectively; and any additional proceeds arising from the sale of any of the Company’s western production facility assets will be allocated first to the senior secured noteholders up to $20.0 million and then allocated 33/34/33% among Alto Pekin’s and ICP’s lenders, collectively, the Company’s senior secured noteholders, and the Company, respectively. As of the filing of this report, the Company believes it is in compliance with the terms and conditions of the ICP Credit Facility. Alto Ingredients, Inc. Senior Secured Notes – On December 12, 2016, the Company entered into a Note Purchase Agreement with five accredited investors and sold $55.0 million in aggregate principal amount of senior secured notes to the investors in a private offering for aggregate gross proceeds of 97% of the principal amount of the notes sold. On June 26, 2017, the Company entered into a second Note Purchase Agreement with five accredited investors and sold an additional $13.9 million in aggregate principal amount of senior secured notes to the investors in a private offering for aggregate gross proceeds of 97% of the principal amount of the notes sold, and collectively with the notes previously sold, (the “Notes”). The Notes are secured by a first-priority security interest in all of the Company’s equity interests in Alto Op Co. The Notes and related agreements contain a variety of representations, warranties, covenants and events of default. Following a series of amendments and waivers with the senior secured note holders and their agent, certain terms of the agreements are as follows:
| ● | The Notes mature on December 15, 2021.
| ● | Payments due under the Notes rank senior to all other indebtedness of Alto Ingredients, Inc. other than permitted senior indebtedness.
| ● | Interest on the Notes accrues at a rate of 15% per annum.
| ● | Any voluntary prepayments must made at 102% of the principal amount prepaid.
The Notes also contain a variety of limitations, including a prohibition on parent company indebtedness; restrictions on redemption, repurchase or payment of any dividend or distribution in respect of our or our subsidiaries’ equity interests; restrictions on asset sales and other dispositions; and restrictions on our or our subsidiaries’ ability to issue equity for purposes other than to pay down a portion of the outstanding balance of the Notes. In March 2020, ICP granted to the senior secured noteholders a security interest in certain of its personal property. In addition, Alto Central granted to the senior secured noteholders a security interest in certain of its personal property. Alto Central also pledged its equity interests in Alto Pekin and ICP in favor of the senior secured noteholders as additional collateral securing our obligations to the noteholders. Alto Op. Co also granted to the senior secured noteholders a security interest in certain of its personal property. The Company and certain subsidiaries also entered into intercreditor agreements with the ICP’s and Alto Pekin’s lenders, and the agent for the Company’s senior secured noteholders, to address issues of priority and the allocation of proceeds from asset sales. In November 2020, the Company repaid $35.3 million in principal under the Notes using a portion of the net proceeds of its then-recent offerings of common stock and warrants and the sale of certain real property assets at our Magic Valley production facility. As of the filing of this report, the Company believes it is in compliance with the terms and conditions of the Notes. CARES Act Loans – On May 4, 2020, Alto Ingredients and Alto Pekin received loan proceeds from Bank of America, NA under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), through the Paycheck Protection Program administered by the U.S. Small Business Administration. Alto Ingredients received $6.0 million and Alto Pekin received $3.9 million in loan proceeds. The loans mature in two years and bear interest at a rate of 1.00% per annum. Under the terms of the loans, certain amounts may be forgiven if they are used for qualifying expenses as described in the CARES Act, but the Company can provide no assurance that it will be able to obtain forgiveness of all or any portion of the loans. The Company is in the process of applying for loan forgiveness. Maturities of Long-term Debt – The Company’s long-term debt matures as follows (in thousands):
December 31: |  |  |
2021 |  | $ | 25,533 |
2022 |  |  | 72,336 |
|  | $ | 97,869 |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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